(oops, I miss-keyed. This is the complete post) From what I've been
hearing, there are several forms of functionality desired by folks:

1) It should be possible to hide part of a faction. 2) It should be
possible to find the hidden part, using in-game
methods, at least if you try hard enough.
3) It should be possible for the average player to use permissions on
a faction-by-faction basis, unless the to-be-permitted player
is taking pains to hide the unit(s) in question.
4) The "punish the folks with large factions" idea.[tree stealing]
(this may
or may not be important, as there are other mechanisms for this,
but it has the advantage that it makes internal sense).
5) This should all make some sort of in-game logic.

6) More information should be displayed about characters.
In addition, there are several points of my own which haven't been
brought up yet.

6) There should two basic types of "people who's true loyalty is
hard to find." Those who know their faction (and are deliberately
hiding it), and those who work for their immediate superior, and
above all, is the faction.
7) It should be possible to pretend to be a faction, in order to gain
entrance to a location, to defame someone's character, to have someone
come to your rescue who would otherwise hunt you down and kill you, etc.
8) It should be possible for characters with appropriate stealth skill to
notice most of these, and even without a stealth skill, nobles
who are of a faction being faked should notice the pretender if they
are present.
Given all of these, I propose the following system:
Characters do not, by default, display their lords, factions, or
skills, however, the command
ADVERTISE ["wealth", "skill", "lord", "faction," or "loyalty"] number
(optional)
Would cause the specified attribute to be hinted or told in the turn
report. (ie.
Firemaker [2567], faction [401], wealthy, stealthy, sorcerer,
isn't really any of these things.
). Several actions would cause attributes to be
advertised to everyone who noticed them (chopping wood, selling
diamonds, menial maje labor). Several skills would cause attributes to
hidden far better than usual (stealth, mabye magic), several would
allow them to be detected passively (stealth, magic for magical
skills), several would allow allow pretense of attribues (stealth,
persuation), and very possibly, several would allow one noble to
convince a location that another noble had an attribute (which they did
or did not have).

If a noble is recruited by a noble hiding his or her faction loyalty,
that noble is "isolated" (or whatever -- they have lord loyalty, but
no faction loyalty unless they notice their lord's faction loyalty)
and it is impossible to find out their faction directly. However, if
their lord leaves his employ, they will follow him, and if she dies,
they have only a small chance (10%?) of being contacted and
re-recruited.

I'm uncertain what is the sane result for a noble recruited while
pretending a different faction loyalty than one actually possesses.
Prehaps exactly the same, except that the faction loyalty will appear
as "Faction 456" or "Faking Faction 456," rather than just being unknowable.